Are there really this many bad deals?

Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes

So I am looking to purchase my first property in Ewing New Jersey (after looking at multi family (2-4) in other parts of jersey and NYC), and after doing about 20 calculations for rental properties in the area, and it seems that I have only found 2-3 that even positively cash flow and 1 that would give a significant amount of cash flow (over 10%). Being new, I am wondering if I am being too overprotective with some numbers for the costs for some homes, or is that on average How difficult it is to find a good deal?

732-402-6988

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Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

Analyze 100, offer on 10, buy 1...or something similar. REI is all about deal flow...lots of it.

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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
7y
@Antonio Cucciniello, not every market is a good cash flowing market. Also, keep in mind that NJ is known as being a tenant friendly state (not a landlord friendly state). I'm in Northeast PA. Thankfully my local market has some affordable cash flowing B/C class properties.
Since, you are just talking about analyzing properties, what purchase price are you using for your calculations? The asking price?
If you want to see if reasonable deals are found in your area, perhaps analyze a few multifamily properties that recently sold. In those cases, you can use the actual sale price which may be substantially lower.
I myself am about to close on a small single family home, where I negotiated 40% off the asking price. Obviously that is NOT the norm, but if a listing is brand new on the market it may sit a while and have a couple price reductions before selling. So, the sale prices might be somewhat lower than you are thinking.
11 Reply
Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Your expectations are not in line with current market conditions.
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20 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7y
@Antonio Cucciniello IF you ran numbers on 20 properties and 2-3 resulted in >10% cash flow, that's pretty good. Most homes are bought as primary residences, not as rentals.
12 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
7y
Analyze 100, offer on 10, buy 1...or something similar. REI is all about deal flow...lots of it.
30 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
7y
For every 100 deals I run through of 2-4 units I send out maybe 2 or 3 of them to clients so around 2-3% of deals cashflow in nice area. You have to understand though those other 97% aren't bad or they wouldn't be selling they just aren't for you. Lots of people buy with higher down payments or look more to live in unit and focus on appreciation/paydown/rent growth.

If property appreciates 2.5% a year at 25% down that's a 10% return. If you are house hacking and put 5% down you just made a 50% return in 1 year. Huge!

The mortgage principal paydown comes to 5-7% return depending on rate at 25% down.
8 Reply
Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
7y
Like the others say you have to run ALOT of deals to find the good ones. For example Kansas City's market supply is 2.4(anything below 6 is a sellers market) and prices since 2016 have risen 180K-225K. You also have to look at your numbers and adjust to the market. There is a mix of things to look at but don't wait to invest. Always a great time to invest :)
3 Reply
Sharon Rosendahl
Investor · Quilcene, WA · Member since 2017 · 230 posts · 169 votes
7y
Sometimes it is a matter of figuring out what you need to pay to make the property cash flow. Offer that amount. It may be that they will reject the offer. That is fine, move on to the next one and keep doing that until you find someone who will sell at a price that works for you. It could be, that area just doesn't have what you need and you will need to look somewhere else. It could be, people have over priced and are willing to lower their price. It might be that the place will sell to someone who didn't really analyze the numbers or someone who buys for appreciation and has enough money they aren't worried about their current return.
4 Reply
Victor Vella
Flipper/Rehabber · Cleveland, OH · Member since 2014 · 173 posts · 121 votes
7y
@Antonio Cucciniello
As A full-time investor in Cleveland
I soft appraise 100 houses a month. View 30. Appraise 20. Offer 10. Get 1.
The more you pencil deals, make offers, make mistakes the better you’ll get at creating mental shortcuts.
Market conditions are still in favor of sellers. Buyers are buying owner occupant or investors would prefer real estate vs stocks. Bond yields are getting chased lower and lower by the tide of boomers returning IMO looking for cash flow.
There will come a day again when the buyers seat will rule the market....but damn this is taking forever 😆.
Keep running numbers you’ll get better and faster over time! Golden rule in investing that has served me well...Be patient.
9 Reply
Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Each market will have a different % of good deals and bad deals. Each market will also be different in what it offers. Some are cash flow markets some are not. You need to understand what it offers then you can know what a good deal is in a given market.
0 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Kevin Sobilo:
@Antonio Cucciniello, not every market is a good cash flowing market. Also, keep in mind that NJ is known as being a tenant friendly state (not a landlord friendly state). I'm in Northeast PA. Thankfully my local market has some affordable cash flowing B/C class properties.
Since, you are just talking about analyzing properties, what purchase price are you using for your calculations? The asking price?
If you want to see if reasonable deals are found in your area, perhaps analyze a few multifamily properties that recently sold. In those cases, you can use the actual sale price which may be substantially lower.
I myself am about to close on a small single family home, where I negotiated 40% off the asking price. Obviously that is NOT the norm, but if a listing is brand new on the market it may sit a while and have a couple price reductions before selling. So, the sale prices might be somewhat lower than you are thinking.
I am looking in the less than 200K range but I first run the numbers with the asking price then and I play with the asking price to see if I can get a good deal at a certain price. Multifamilies are few and far in between, but I will look at those for some guidance.

732-402-6988
0 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Mike Dymski:
Analyze 100, offer on 10, buy 1...or something similar. REI is all about deal flow...lots of it.

I clearly have to get my numbers up then! Thanks
732-402-6988
1 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Glad ok, just trying to understand! thank you for shedding some light!

732-402-6988
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Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Russell Brazil:
Your expectations are not in line with current market conditions.

Can you explain further? I am not sure what you mean

732-402-6988
1 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Theresa Harris:
@Antonio Cucciniello IF you ran numbers on 20 properties and 2-3 resulted in >10% cash flow, that's pretty good. Most homes are bought as primary residences, not as rentals.

Only 2-3 positive cashflowing, 1 over 10%. So 5% rate with my small sample size!
732-402-6988
0 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Henry Lazerow:
For every 100 deals I run through of 2-4 units I send out maybe 2 or 3 of them to clients so around 2-3% of deals cashflow in nice area. You have to understand though those other 97% aren't bad or they wouldn't be selling they just aren't for you. Lots of people buy with higher down payments or look more to live in unit and focus on appreciation/paydown/rent growth.

If property appreciates 2.5% a year at 25% down that's a 10% return. If you are house hacking and put 5% down you just made a 50% return in 1 year. Huge!

The mortgage principal paydown comes to 5-7% return depending on rate at 25% down.

Some good insight on the numbers thank you!
732-402-6988
0 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Caleb Brown:
Like the others say you have to run ALOT of deals to find the good ones. For example Kansas City's market supply is 2.4(anything below 6 is a sellers market) and prices since 2016 have risen 180K-225K. You also have to look at your numbers and adjust to the market. There is a mix of things to look at but don't wait to invest. Always a great time to invest :)

Yes, I am about the mentality of dont wait to invest either. I think that waiting to time the market only leads to poor decision making!

732-402-6988
2 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Victor Vella:
@Antonio Cucciniello
As A full-time investor in Cleveland
I soft appraise 100 houses a month. View 30. Appraise 20. Offer 10. Get 1.
The more you pencil deals, make offers, make mistakes the better you’ll get at creating mental shortcuts.
Market conditions are still in favor of sellers. Buyers are buying owner occupant or investors would prefer real estate vs stocks. Bond yields are getting chased lower and lower by the tide of boomers returning IMO looking for cash flow.
There will come a day again when the buyers seat will rule the market....but damn this is taking forever 😆.
Keep running numbers you’ll get better and faster over time! Golden rule in investing that has served me well...Be patient.

Be patient to find a good deal? Or act and get in there for maybe a slightly smaller deal? Thats what I have been toying with in my head!
732-402-6988
0 Reply
Antonio CuccinielloPro Member
OP
Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
7y
Originally posted by @Frank Wong:
Each market will have a different % of good deals and bad deals. Each market will also be different in what it offers. Some are cash flow markets some are not. You need to understand what it offers then you can know what a good deal is in a given market.

Yes, I am starting to realize that now, thank you for your advice!
732-402-6988
0 Reply
Victor Vella
Flipper/Rehabber · Cleveland, OH · Member since 2014 · 173 posts · 121 votes
7y
That should tell you what kind of market where in
“Be patient and wait for a good deal or....”
There is ALWAYS a deal out there. It’s a matter of being flexible, nimble, and constantly scanning.
1 Reply
Victor Vella
Flipper/Rehabber · Cleveland, OH · Member since 2014 · 173 posts · 121 votes
7y
Acquisition is everything.
0 Reply
Amit Golan
Member since 2019 · 6 posts · 5 votes
7y
As the saying goes - "good deals aren't found, they are created"
2 Reply
Dan Sarao
Investor · Cape Coral, FL · Member since 2019 · 135 posts · 41 votes
7y
I am not sure what your strategy is, or if you have a desire to do repairs or renovations, but if you go the off market route you will start off in a much better position both for equity and returns. Everyone is on the MLS looking at those same properties you are. Find a better way, or at least add off market properties to your arsenal at the top of your deal pipeline my friend. By the way, I tried for years to find deals in the northeast (Boston market). It's tough. Long-distance investing can be your friend.
2 Reply
Amit Golan
Member since 2019 · 6 posts · 5 votes
7y
@Caleb Brown
You mentioned Kansas City's market supply being a 2.4. Can you share details on how/where you got this information and what this scale actually represents? For example how can I use this figure to compare to different markets?
Thanks
2 Reply
Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
7y
@Antonio Cucciniello
Instead of looking NJ/NY, you need to look toward Pennsylvania. Nj is ridiculous.
1 Reply
Erik B.
Rental Property Investor · Amityville, NY · Member since 2018 · 351 posts · 441 votes
7y
@Antonio Cucciniello
Glad you posted this. I am struggling w the same. I have a few flips under my belt and one rental but am trying to grow the rental portfolio by 10 units in the next few years.
Been analyzing every day and putting out offers that work for me. I am continually shocked by the junk that is out there and the prices people will pay for it.
Forget about legal multi family- 600k+ for a 2 family that would get $4500 in rental income and has taxes near $15k.
I have to put more effort into "offmarket " pipeline. Trying to figure that out
Good luck to you.
5 Reply

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